The impact of climate policy uncertainty on financial market resilience: Evidence from China

Si-Yao Wei and Wei-Xing Zhou

Papers from arXiv.org

Abstract: Resilience serves to assess the ability of the financial market to resist external shocks and to recover from shocks. The intensity and duration, used to indicate resilience, are calculated for China's financial market in this paper, focusing on the performance of each financial sub-market during and after several crises. Also, given that climate issues have been recognized as an important source of risk by financial market, we investigate the connectedness and mechanism of China's climate policy uncertainty (CPU) to its financial market resilience. We have found that the two resilience indicators of each market have a relatively consistent trend, but connectedness among markets has different sensitivities to both. In addition, China's CPU affects its financial market resilience by increasing the investor sentiment index and the non-performing loan ratio of commercial banks, and by reducing the capital and financial account balance. It is further found that China's financial markets' consensus on the unswerving implementation of climate policy, which provides the reference for other countries on how to balance climate policy's introduction and financial market development.

Date: 2024-09, Revised 2025-03
New Economics Papers: this item is included in nep-ban, nep-cna, nep-ene and nep-env
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